The Official Definition FROM VOLUME TO VALUE: and How to Get There. What is an Accountable Care Organization?

Transcription

1 FROM VOLUME TO VALUE: Better Ways to Pay for Health Care, and How to Get There Harold D. Miller Executive Director Center for Healthcare Quality and Reform and President and CEO Network for Regional Healthcare Improvement What is an Accountable Care Organization? 2 The Official Definition What is an Accountable Care Organization? A group of providers who are accountable for the quality, cost, and overall care of patients Section 3022, Patient Protection and Affordable Care Act 3 1

2 The Real Definition What is an Accountable Care Organization? A group of providers who can figure out how to save money in health care 4 How Will ACOs Generate All These Savings? Financial Risk Patients ACO ( the Black Box ) Lower Costs Organizational Structure 5 What s In That Black Box Can t Be Good For Consumers, Can It? Financial Risk Patients ACO RATIONING ( the Black Box ) Lower Costs Organizational Structure 6 2

3 Early Successes Need to Assure That Savings Rationing Financial Risk Patients REDUCING COSTS WITHOUT RATIONING Lower Costs Organizational Structure 7 Supporting Value & Coordination, Not Risk and Consolidation Value-Based Financial Risk Patients REDUCING COSTS WITHOUT RATIONING Lower Costs Organizational Coordination Structure of Care 8 Reducing Costs Without Rationing: Can It Be Done?? 9 3

4 Reducing Costs Without Rationing: Prevention and Wellness Healthy Consumer Continued Health Preventable Condition 10 Reducing Costs Without Rationing: Avoiding Hospitalizations Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode 11 Reducing Costs Without Rationing: Efficient, Treatment Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode Efficient High-Cost Complications, Infections, Readmissions 12 4

5 Healthy Consumer Reducing Costs Without Rationing: Is Also Quality Improvement! Continued Health Preventable Condition Better s/higher Quality No Hospitalization Acute Care Episode Efficient High-Cost Complications, Infections, Readmissions 13 Current Systems Reward Bad s, Not Better Health Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode Efficient High-Cost Complications, Infections, Readmissions 14 Are There Better Ways to Pay for Health Care? Healthy Consumer? Continued Health Preventable Condition No Hospitalization Acute Care Episode Efficient High-Cost Complications, Infections, Readmissions 15 5

6 Episode s to Reward Value Within Episodes Healthy Consumer Continued Health Preventable Condition A Single For All Care Needed From All Providers in the Episode, With a Warranty For Complications No Hospitalization Acute Care Episode Episode Efficient High-Cost Complications, Infections, Readmissions 16 Yes, a Health Care Provider Can Offer a Warranty Geisinger Health System ProvenCare SM A single payment for an ENTIRE 90 day period including: ALL related pre-admission care ALL inpatient physician and hospital services ALL related post-acute care ALL care for any related complications or readmissions Types of conditions/treatments currently offered: Cardiac Bypass Surgery Cardiac Stents Cataract Surgery Total Hip Replacement Bariatric Surgery Perinatal Care Low Back Pain Treatment of Chronic Kidney Disease 17 + Process Improvement = Better s, Lower Costs 18 6

7 What a Single Physician and Hospital Can Do In 1987, an orthopedic surgeon in Lansing, MI and the local hospital, Ingham Medical Center, offered: a fixed total price for surgical services for shoulder and knee problems a warranty for any subsequent services needed for a two-year period, including repeat visits, imaging, rehospitalization and additional surgery. Results: Surgeon received over 80% more in payment than otherwise Hospital received 13% more than otherwise, despite fewer rehospitalizations Health insurer paid 40% less than otherwise Method: Reducing unnecessary auxiliary services such as radiography and physical therapy Reducing the length of stay in the hospital Reducing complications and readmissions. 19 The Weakness of Episode Healthy Consumer Continued Health Preventable Condition How do you prevent unnecessary episodes of care? (e.g., preventable hospitalizations for chronic disease, overuse of cardiac surgery, back surgery, etc.) No Hospitalization Acute Care Episode Episode Efficient High-Cost Complications, Infections, Readmissions 20 Comprehensive Care s To Avoid Episodes Healthy Consumer A Single For All Care Needed For A Condition Continued Health Preventable Condition Comprehensive Care or Global No Hospitalization Acute Care Episode Efficient High-Cost Complications, Infections, Readmissions 21 7

8 CAPITATION (WORST VERSIONS) No Additional Revenue for Taking Sicker Patients Isn t This Capitation? No It s Different COMPREHENSIVE CARE PAYMENT Levels Adjusted Based on Patient Conditions Providers Lose Money On Unusually Expensive Cases Providers Are Paid Regardless of the Quality of Care Provider Makes More Money If Patients Stay Well Limits on Total Risk Providers Accept for Unpredictable Events Bonuses/Penalties Based on Quality Measurement Provider Makes More Money If Patients Stay Well Flexibility to Deliver Highest-Value Services Flexibility to Deliver Highest-Value Services 22 Example: BCBS Massachusetts Alternative Quality Contract Single payment for all costs of care for a population of patients Adjusted up/down annually based on severity of patient conditions Initial payment set based on past expenditures, not arbitrary estimates Provides flexibility to pay for new/different services Bonus paid for high quality care Five-year contract Savings for payer achieved by controlling increases in costs Allows provider to reap returns on investment in preventive care, infrastructure Broad participation 14 physician groups/health systems participating with over 400,000 patients, including one primary care IPA with 72 physicians Positive first-year results Higher ambulatory care quality than non-aqc practices, better patient outcomes, lower readmission rates and ER utilization 23 Comprehensive Care & Episode Can Be Complementary Healthy Consumer Comp. Care/ Global Continued Health Preventable Condition E.g., an annual payment to manage an individual s chronic disease, including costs of hospitalizations for exacerbations No Hospitalization Acute Care Episode Episode E.g., the payment made when the individual has an exacerbation requiring hospitalization Efficient High-Cost Complications, Infections, Readmissions 24 8

9 A Deeper Dive into Episode s and Implications Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode Episode Efficient High-Cost Complications, Infections, Readmissions 25 How Can Physicians, Hospitals, & Payers Benefit from Warranties? 26 Prices for Warrantied Care Will Likely Be Higher 27 9

10 Prices for Warrantied Care Will Likely Be Higher Q: Why should we pay more to get good-quality care?? A: In most industries, warrantied products cost more, but they re desirable because TOTAL spending on the product (repairs & replacement) is lower than without the warranty 28 Prices for Warrantied Care May Be Higher, But Spending Lower Q: Why should we pay more to get good-quality care?? A: In most industries, warrantied products cost more, but they re desirable because TOTAL spending on the product (repairs & replacement) is lower than without the warranty In healthcare, a DRG with a warranty would need to have a higher payment rate than the equivalent non-warrantied DRG, but the higher price would be offset by fewer DRGs w/ complications, outlier payments, and readmissions 29 Example: 10,000 Procedure Cost of Procedure 10,

11 Cost of Procedure Actual Average for Procedure is Higher than 10,000 Added Cost of Infection Rate of Infections Average Total Cost 10,000 20,000 5% 11, Cost of Procedure Starting Point for Warranty Price: Actual Current Average Added Cost of Infection Rate of Infections Average Total Cost Price Charged Change in Net Revenue 10,000 20,000 5% 11,000 11, Cost of Procedure Limited Warranty Gives Financial Incentive to Improve Quality Added Cost of Infection Rate of Infections Average Total Cost Price Charged Change in Net Revenue 10,000 20,000 5% 11,000 11, ,000 20,000 4% 10,800 11, Reducing Adverse Events...Reduces Costs... Improves The Bottom Line 33 11

12 Cost of Procedure Higher-Quality Provider Can Charge Less, Attract More Patients Added Cost of Infection Rate of Infections Average Total Cost Price Charged Change in Net Revenue 10,000 20,000 5% 11,000 11, ,000 20,000 4% 10,800 11, ,000 20,000 4% 10,800 10,800 0 Enables Lower Prices 34 Cost of Procedure A Virtuous Cycle of Quality Improvement & Cost Reduction Added Cost of Infection Rate of Infections Average Total Cost Price Charged Change in Net Revenue 10,000 20,000 5% 11,000 11, ,000 20,000 4% 10,800 11, ,000 20,000 4% 10,800 10, ,000 20,000 3% 10,600 10, Reducing Adverse Events...Reduces Costs... Improves The Bottom Line 35 Cost of Procedure Win-Win-Win for Patients, Payers, and Providers Added Cost of Infection Rate of Infections Average Total Cost Price Charged Change in Net Revenue 10,000 20,000 5% 11,000 11, ,000 20,000 4% 10,800 11, ,000 20,000 4% 10,800 10, ,000 20,000 3% 10,600 10, ,000 20,000 3% 10,600 10, ,000 20,000 0% 10,000 10, Quality is Better......Cost is Lower......Providers More Profitable 36 12

13 Cost of Procedure In Contrast, Non- Alone Creates Financial Losses Added Cost of Infection Rate of Infections Average Total Cost Amount Paid Change in Net Revenue 10,000 20,000 5% 11,000 11, ,000 20,000 5% 11,000 10,000-1,000 10,000 20,000 3% 10,600 10, ,000 20,000 0% 10,000 10,000 0 Non- for Infections Causes Losses While Improving 37 Not Just Better Acute Care, But Reducing the Need for It Healthy Consumer Continued Health Preventable Condition No Hospitalization Acute Care Episode Efficient High-Cost Complications, Infections, Readmissions 38 Significant Reduction in Rate of Hospitalizations Possible Examples: 40% reduction in hospital admissions, 41% reduction in ER visits for exacerbations of COPD using in-home & phone patient education by nurses or respiratory therapists J. Bourbeau, M. Julien, et al, Reduction of Hospital Utilization in Patients with Chronic Obstructive Pulmonary Disease: A Disease-Specific ifi Self-Management tintervention, ti Archives of Internal Medicine i 163(5), % reduction in hospitalizations for CHF patients using homebased telemonitoring M.E. Cordisco, A. Benjaminovitz, et al, Use of Telemonitoring to Decrease the Rate of Hospitalization in Patients With Severe Congestive Heart Failure, American Journal of Cardiology 84(7), % reduction in hospital admissions, 21% reduction in ER visits through self-management education M.A. Gadoury, K. Schwartzman, et al, Self-Management Reduces Both Short- and Long-Term Hospitalisation in COPD, European Respiratory Journal 26(5),

14 We Don t Pay for the Things That Will Prevent Overutilization Physician Practice CURRENT PAYMENT SYSTEMS Health Insurance Plan Office Phone Calls Nurse Care Mgr No payment for services that can prevent utilization... ER Lab Work/ Imaging Hospital Stay...No penalty or reward for high utilization elsewhere 40 Condition- Adjusted Per Person Global Can Solve That, But It s a Big Jump from FFS FULL COMP. CARE/GLOBAL PAYMENT Physician Practice/ ACO Health Insurance Plan Office Phone Calls Nurse Care Mgr ER Lab Work/ Imaging Hospital Stay Flexibility and accountability for a condition-adjusted budget covering all services 41 What Might a Transitional System Look Like? Physician Practice CURRENT PAYMENT SYSTEMS Health Insurance Plan Office Phone Calls Nurse Care Mgr ER Lab Work/ Imaging Hospital Stay 42 14

15 Typical Medical Home Solution : Pay More for Physician Services (TYPICAL) MEDICAL HOME PROGRAM Health Insurance Plan Physician Practice Office Monthly Care Mgt Phone Calls RN Care Mgr Higher payment for primary care... ER Lab Work/ Imaging Hospital Stay 43 Weakness: More for Physicians, But Any Savings Elsewhere? (TYPICAL) MEDICAL HOME PROGRAM Health Insurance Plan Physician Practice Office Monthly Care Mgt Phone Calls RN Care Mgr Higher payment for primary care... ER Lab Work/ Imaging Hospital Stay...But no commitment to reduce utilization elsewhere 44 Is Shared Savings the Answer? SHARED SAVINGS MODEL Physician Practice...Returned to physician practice after savings determined... Health Insurance Plan Office Phone Calls Nurse Care Mgr...but no upfront for better care ER Lab Work/ Imaging Hospital Stay Portion of savings from reduced spending in other areas

16 Weaknesses of Shared Savings Provides no upfront money to enable physician practices to hire nurse care managers, install IT, etc.; additional funds, if any, come years after the care changes are made Requires TOTAL costs to go down in order for the physician practice to receive ANY increase in payment, even if the practice can t control all costs Gives more rewards to the poor performers who improve than the providers who ve done well all along The underlying fee for service incentives continue; losing less (via shared savings) is still losing compared to FFS I.e., it s not really true payment reform 46 Better Approach: Simulate Flexibility/Incentives of Global Pmt CARE MGT PAYMENT + UTILIZATION P4P Physician Practice More for PCP Health Insurance Plan Office Monthly Care Mgt Phone Calls RN Care Mgr ER Lab Work/ Imaging P4P Bonus/Penalty Based on Utilization Hospital Stay Targets for Reduction In Utilization 47 Example: Washington State Medical Home Pilot Program Payers will pay the Primary Care Practice an upfront PMPM Care Management for all patients (2.50 first year, 2.00 future years) Practice agrees to reduce rate of non-urgent ER visits and ambulatory care-sensitive hospital admissions by amounts which will generate savings for payers at least equal to the Care Management (targets are practice specific) If a practice reduces ER visits and hospitalizations by more than the target amount, the payer shares 50% of the net savings (gross savings minus the PMPM) with the practice If a practice fails to meet its ER/hospitalization targets, the practice pays a penalty via a reduction in its FFS conversion factor equivalent to up to 50% of Care Management 48 16

17 Example: A Hypothetical Underpaid PCP Practice PRIMARY CARE PRACTICE PCPs 4 ER / Patients/Physician 2,000 % Preventable 40% PMPY Primary Care Cost 140 Per ER Visit 1,000 Annual Revenue 1,120,000 ER Visit Cost to Payer 640,000 Overhead Costs 400,000 PhysicianSalary 180, Cost of Nurse Practitioner 80,000 Reduction in Prev. ER 40% Other Costs 10,000 Savings 256,000 Total Costs 90,000 Upfront 90,000 to Practice 90,000 Net Savings to Payer 166,000 Share of Savings 83,000 Share to Practice 50% New Physician Salary 200,750 Net Savings to Payer 83,000 Increase in Phys. Salary 12% % Savings to Payer 13% 49 Many Patients Are Going to ER Due to Difficulty Seeing PCPs PRIMARY CARE PRACTICE HEALTH PLAN ER EXPENSES PCPs 4 ER / Patients/Physician 2,000 % Preventable 40% PMPY Primary Care Cost 140 Per ER Visit 1,000 Annual Revenue 1,120,000 ER Visit Cost to Payer 640,000 Overhead Costs 400,000 PhysicianSalary 180, Cost of Nurse Practitioner 80,000 Reduction in Prev. ER 40% Other Costs 10,000 Savings 256,000 Total Costs 90,000 Upfront 90,000 to Practice 90,000 Net Savings to Payer 166,000 Share of Savings 83,000 Share to Practice 50% New Physician Salary 200,750 Net Savings to Payer 83,000 Increase in Phys. Salary 12% % Savings to Payer 13% 50 PCPs Could Reduce ER Expenses With Right Resources PRIMARY CARE PRACTICE HEALTH PLAN ER EXPENSES PCPs 4 ER / Patients/Physician 2,000 % Preventable 40% PMPY Primary Care Cost 140 Per ER Visit 1,000 Annual Revenue 1,120,000 ER Visit Cost to Payer 640,000 Overhead Costs 400,000 PhysicianSalary 180, Cost of Nurse Practitioner 80,000 Reduction in Prev. ER 40% Other Costs 10,000 Savings 256,000 Total Costs 90,000 Upfront 90,000 to Practice 90,000 Net Savings to Payer 166,000 Share of Savings 83,000 Share to Practice 50% New Physician Salary 200,750 Net Savings to Payer 83,000 Increase in Phys. Salary 12% % Savings to Payer 13% 51 17

18 Upfront Money Could Enable PCPs to Change, If Willing PRIMARY CARE PRACTICE HEALTH PLAN ER EXPENSES PCPs 4 ER / Patients/Physician 2,000 % Preventable 40% PMPY Primary Care Cost 140 Per ER Visit 1,000 Annual Revenue 1,120,000 ER Visit Cost to Payer 640,000 Overhead Costs 400,000 PhysicianSalary 180, Cost of Nurse Practitioner 80,000 Reduction in Prev. ER 40% Other Costs 10,000 Savings 256,000 Total Costs 90,000 Upfront 90,000 to Practice 90,000 Net Savings to Payer 166,000 Share of Savings 83,000 Share to Practice 50% New Physician Salary 200,750 Net Savings to Payer 83,000 Increase in Phys. Salary 12% % Savings to Payer 13% 52 Pay Bonus to Physicians for Savings Beyond Upfront Costs PRIMARY CARE PRACTICE HEALTH PLAN ER EXPENSES PCPs 4 ER / Patients/Physician 2,000 % Preventable 40% PMPY Primary Care Cost 140 Per ER Visit 1,000 Annual Revenue 1,120,000 ER Visit Cost to Payer 640,000 Overhead Costs 400,000 PhysicianSalary 180, Cost of Nurse Practitioner 80,000 Reduction in Prev. ER 40% Other Costs 10,000 Savings 256,000 Total Costs 90,000 Upfront 90,000 to Practice 90,000 Net Savings to Payer 166,000 Share of Savings 83,000 Share to Practice 50% New Physician Salary 200,750 Net Savings to Payer 83,000 Increase in Phys. Salary 12% % Savings to Payer 13% 53 Win-Win-Win for PCPs, Patients, & Premiums PRIMARY CARE PRACTICE HEALTH PLAN ER EXPENSES PCPs 4 ER / Patients/Physician 2,000 % Preventable 40% PMPY Primary Care Cost 140 Per ER Visit 1,000 Annual Revenue 1,120,000 ER Visit Cost to Payer 640,000 Overhead Costs 400,000 PhysicianSalary 180, Cost of Nurse Practitioner 80,000 Reduction in Prev. ER 40% Other Costs 10,000 Savings 256,000 Total Costs 90,000 Upfront 90,000 to Practice 90,000 Net Savings to Payer 166,000 Share of Savings 83,000 Share to Practice 50% New Physician Salary 200,750 Net Savings to Payer 83,000 Increase in Phys. Salary 12% % Savings to Payer 13% 54 18

19 But Upfront Reform is Needed So Care Can Be Changed PRIMARY CARE PRACTICE HEALTH PLAN ER EXPENSES PCPs 4 ER / Patients/Physician 2,000 % Preventable 40% PMPY Primary Care Cost 140 Per ER Visit 1,000 Annual Revenue 1,120,000 ER Visit Cost to Payer 640,000 Overhead Costs 400,000 PhysicianSalary 180, Cost of Nurse Practitioner 80,000 Reduction in Prev. ER 40% Other Costs 10,000 Savings 256,000 Total Costs 90,000 Upfront 90,000 to Practice 90,000 Net Savings to Payer 166,000 Share of Savings 83,000 Share to Practice 50% New Physician Salary 200,750 Net Savings to Payer 83,000 Increase in Phys. Salary 12% % Savings to Payer 13% 55 And Savings Targets Need to Be Feasible for Practice to Achieve PRIMARY CARE PRACTICE HEALTH PLAN ER EXPENSES PCPs 4 ER / Patients/Physician 2,000 % Preventable 40% PMPY Primary Care Cost 140 Per ER Visit 1,000 Annual Revenue 1,120,000 ER Visit Cost to Payer 640,000 Overhead Costs 400,000 PhysicianSalary 180, Cost of Nurse Practitioner 80,000 Reduction in Prev. ER 40% Other Costs 10,000 Savings 256,000 Total Costs 90,000 Upfront 90,000 to Practice 90,000 Net Savings to Payer 166,000 Share of Savings 83,000 Share to Practice 50% New Physician Salary 200,750 Net Savings to Payer 83,000 Increase in Phys. Salary 12% % Savings to Payer 13% 56 Would the Shared Savings Model Achieve the Same Goal? 57 19

20 Same PCP Practice as Before... Year 0 PCP Revenues 1,120,000 Shared Savings Total 1,120,000 Expenses 1,120,000 Care Mgt 0 Total 1,120,000 Net Revenue 0 Margin 0.0% 58 Simple Model: Payer Spending Limited to PCPs & Prev. ER Year 0 PCP Revenues 1,120,000 Shared Savings Total 1,120,000 Expenses 1,120,000 Care Mgt 0 Total 1,120,000 Net Revenue 0 Margin 0.0% Payer PCP Costs 1,120,000 ER Costs 640,000 50% Shared Savings Total 1,760,000 Savings From Year 0 0 % Savings 59 PCP Invests in Year 1, Payer Reaps Benefit, PCP Loses Year 0 Year 1 PCP Revenues 1,120,000 1,120,000 Shared Savings Total 1,120,000 1,120,000 Expenses 1,120,000 1,120,000 Care Mgt 0 90, Total 1,120,000 1,210,000 Net Revenue 0 90,000 Margin 0.0% 7.4% Payer PCP Costs 1,120,000 1,120,000 ER Costs 640, ,000 50% Shared Savings Total 1,760,000 1,504,000 Savings From Year ,000 % Savings 15% PCP Invests in Better Care Mgt 60 20

21 PCP Invests in Year 1, Payer Reaps Benefit, PCP Loses Year 0 Year 1 PCP Revenues 1,120,000 1,120,000 Shared Savings Total 1,120,000 1,120,000 No New Revenues for PCP in Year 1 Expenses 1,120,000 1,120,000 Care Mgt 0 90, Total 1,120,000 1,210,000 Net Revenue 0 90,000 Margin 0.0% 7.4% Payer PCP Costs 1,120,000 1,120,000 ER Costs 640, ,000 50% Shared Savings Total 1,760,000 1,504,000 Savings From Year ,000 % Savings 15% PCP Invests in Better Care Mgt Negative Margin for PCP in Year 1 Payer Benefits if PCP is 61 More PCP Revenue in Year 2, But Not Enough to Cover Year 1 Loss Year 0 Year 1 Year 2 PCP Revenues 1,120,000 1,120,000 1,120,000 Shared Savings 128,000 Total 1,120,000 1,120,000 1,248,000 Shared Savings Paid in Year 2 Expenses 1,120,000 1,120,000 1,120,000 Care Mgt 0 90, , Total 1,120,000 1,210,000 1,210,000 Net Revenue 0 90,000 38,000 Margin 0.0% 7.4% 3.1% Payer PCP Costs 1,120,000 1,120,000 1,120,000 ER Costs 640, , ,000 50% Shared Savings 128,000 Total 1,760,000 1,504,000 1,632,000 Savings From Year , ,000 % Savings 15% 7% Positive Margin But < Year 1 Loss Payer Still Benefits 62 PCP Still Worse Off After 3 Years, Payer Saves Significantly Year 0 Year 1 Year 2 Year 3 Total Yrs 1 3 PCP Revenues 1,120,000 1,120,000 1,120,000 1,120,000 3,360,000 Shared Savings 128, , ,000 Total 1,120,000 1,120,000 1,248,000 1,248,000 3,616,000 Expenses 1,120,000 1,120,000 1,120,000 1,120,000 3,360,000 Care Mgt 0 90, , , , Total 1,120,000 1,210,000 1,210,000 1,210,000 3,630,000 Net Revenue 0 90,000 38,000 38,000 14,000 Margin 0.0% 7.4% 3.1% 3.1% 0.4% Payer PCP Costs 1,120,000 1,120,000 1,120,000 1,120,000 3,360,000 ER Costs 640, , , ,000 1,152,000 50% Shared Savings 128, ,000 Total 1,760,000 1,504,000 1,632,000 1,632,000 4,768,000 Savings From Year , , , ,000 % Savings 15% 7% 7% 10% Net Loser For PCP Win for Payer 63 21

22 A Perfect Starting Point: Merging Two Reform Silos SILO #1 SILO #2 Implementing Medical Home/ Chronic Care Model Reducing Hospital Readmissions Pay More to Physicians For Being Certified As a Medical Home And Hope That s Improve Penalize Hospitals for Readmissions Even If the Cause is Poor Primary Care 64 Marrying the Medical Home and Hospital Readmissions Reducing Hospital Readmissions Requires Improved Community Care Reducing Hospital Readmissions Lower Hospital Readmissions Provides ROI for Chronic Care Investment Implementing Medical Home/ Chronic Care Model Chronic Care Requires Higher/Different Reforming for Primary/ Chronic Care 65 Not Just PCPs, But The Medical Neighborhood, Too Resources & Incentives for More Coordinated Care FFS Based on Volume, Procedures, & Office Primary Care Medical Home (Non-Primary Care) Specialists PATIENT 66 22

23 Pay Both PCPs & Specialists for s & Coordination Resources & Incentives for More Coordinated Care for Consultation w/ PCP; s-based Primary Care Medical Home (Non-Primary Care) Specialists PATIENT 67 Today: Underpaid PCPs, Underused Specialists, High Costs 500 Moderate/Severe Chronic Disease Patients Uncoordinated Management Today / Per Visit Yr Per Pt Total PCP ,000 Per Month Mo/Yr Per Pt Total Drugs ,000 2,000,000 Per Stay Stays/ Yr Per Pt Total Hospital 10, ,000 5,000,000 Per Visit / Yr Per Pt Total Specialist ,000 Total 7,500, Today: Underpaid PCPs, Underused Specialists, High Costs 500 Moderate/Severe Chronic Disease Patients Uncoordinated Management Today / Per Visit Yr Per Pt Total PCP ,000 Per Month Mo/Yr Per Pt Total Drugs ,000 2,000,000 Per Stay Stays/ Yr Per Pt Total Hospital 10, ,000 5,000,000 Per Visit / Yr Per Pt Total Specialist ,000 Total 7,500, % of the money goes to the physicians 69 23

24 Pay PCPs & Specialists to Provide More Coordinated, Proactive Care 500 Moderate/Severe Chronic Disease Patients Uncoordinated Management Today Coordinated Management Tomorrow / Per Pt Total Change Per Visit Yr Per Pt Total PCP 1, ,000 67% PCP ,000 Specialist 1, , % Per Month Mo/Yr Per Pt Total Per Month Mo Filled Per Pt Total Drugs ,000 2,000,000 Drugs ,800 2,400,000 20% Per Stay Stays/ Yr Per Pt Total Per Stay Stays/ Yr Per Case Total Hospital 10, ,000 5,000,000 Hospital 10, ,500 3,750,000 25% Per Visit / Yr Per Pt Total Specialist ,000 Total 7,500,000 Total 7,150,000 5% Pay for Patient Care, Not 70 Higher Medication Expenses, But Lower Hospital Costs 500 Moderate/Severe Chronic Disease Patients Uncoordinated Management Today Coordinated Management Tomorrow / Per Pt Total Change Per Visit Yr Per Pt Total PCP 1, ,000 67% PCP ,000 Specialist 1, , % Per Month Mo/Yr Per Pt Total Per Month Mo Filled Per Pt Total Drugs ,000 2,000,000 Drugs ,800 2,400,000 20% Per Stay Stays/ Yr Per Pt Total Per Stay Stays/ Yr Per Case Total Hospital 10, ,000 5,000,000 Hospital 10, ,500 3,750,000 25% Per Visit / Yr Per Pt Total Specialist ,000 Total 7,500,000 Total 7,150,000 5% Pay for Patient Care, Not Better s Better Medication Compliance 71 Win-Win-Win Through PCP/Specialist Coordinated Mgt 500 Moderate/Severe Chronic Disease Patients Uncoordinated Management Today Coordinated Management Tomorrow / Per Pt Total Change Per Visit Yr Per Pt Total PCP 1, ,000 67% PCP ,000 Specialist 1, , % Per Month Mo/Yr Per Pt Total Per Month Mo Filled Per Pt Total Drugs ,000 2,000,000 Drugs ,800 2,400,000 20% Per Stay Stays/ Yr Per Pt Total Per Stay Stays/ Yr Per Case Total Hospital 10, ,000 5,000,000 Hospital 10, ,500 3,750,000 25% Per Visit / Yr Per Pt Total Specialist ,000 Total 7,500,000 Total 7,150,000 5% More Revenue for Docs Fewer Hospitalizations Lower Total Costs 72 24

25 Minnesota s DIAMOND Initiative Goal: improve outcomes for patients with depression Convened all payers in Minnesota (except for Medicare) to agree on common payment changes for PCPs & specialists changes: Support for a care manager in the primary care practice Psychiatrists paid to consult with PCP on how to manage patient s care comprehensively, rather than patient having to see psychiatrist separately Result: Dramatic improvement in remission rate 73 Condition- Adjusted Per Person Phase 2: More ACO-ness: Partial Global PARTIAL GLOBAL PMT (Professional Svcs) Physician Practice Health Insurance Plan Office Phone Calls Nurse Care Mgr ER Lab Work/ Imaging Flexibility and accountability for a condition-adjusted budget covering all professional services Hospital Stay P4P Bonus/Penalty Based on Utilization 74 Condition- Adjusted Per Person And Then Transition to a Full Global System FULL COMP. CARE/GLOBAL PAYMENT Physician Practice/ ACO Health Insurance Plan Office Phone Calls Nurse Care Mgr ER Lab Work/ Imaging Hospital Stay P4P Bonus/Penalty Based on Quality 75 25

26 Transitioning to Accountable Care CARE MGT PAYMENT + UTILIZATION P4P Health Insurance Plan Office ER Hospital Stay Physician Monthly Care Mgt Practice Lab Work/ Targets for Phone Imaging Reduction Calls In Utilization RN Care Mgr More P4P Bonus/Penalty for PCP Based on Utilization PARTIAL GLOBAL PMT (Professional Svcs) Health Insurance Plan Condition- Adjusted Per Person Office ER Hospital Stay Physician Phone Practice Calls Lab Work/ P4P Bonus/Penalty Imaging Nurse Based on Utilization Care Mgr Flexibility and accountability FULL COMP. CARE/GLOBAL PMT + QUALITY P4P for a condition-adjusted budget covering all professional services Health Insurance Plan Condition- Adjusted Per Person Office ER Hospital Stay Physician Phone Practice/ Calls ACO Lab Work/ Imaging Nurse Care Mgr P4P Bonus/Penalty Based on Quality 76 Challenge: Giving Physicians the Skills to Take Accountability Inpatient Episodes Physician Practice? Patient Unneeded Testing 77 Resources/Capabilities Needed for Docs to Take Accountability Data and analytics to measure and monitor utilization and quality Physician Practice Coordinated relationships with other specialists and hospitals Method for targeting g high-risk patients (e.g., predictive modeling) Capability for tracking patient care and ensuring followup (e.g., registry) Resources for patient educ. & selfmgt support (e.g., RN care mgr) Physician w/ time for diagnosis, treatment planning, and followup Inpatient Episodes Patient Unneeded Testing 78 26

27 Capabilities Exist Today, But Don t Coordinate w/ Physicians Health Plan or Disease Mgt Vendor Physician Practice Data and analytics to measure and monitor utilization and quality Coordinated relationships with other specialists and hospitals Method for targeting g high-risk patients (e.g., predictive modeling) Capability for tracking patient care and ensuring followup (e.g., registry) Resources for patient educ. & selfmgt support (e.g., RN care mgr) Physician w/ time for diagnosis, treatment planning, and followup Inpatient Episodes Patient Unneeded Testing 79 Medical Home Initiatives Expand Practice Capacity, But Not Enough Health Plan Patient- Centered Medical Home Data and analytics to measure and monitor utilization and quality Coordinated relationships with other specialists and hospitals Method for targeting g high-risk patients (e.g., predictive modeling) Capability for tracking patient care and ensuring followup (e.g., registry) Resources for patient educ. & selfmgt support (e.g., RN care mgr) Physician w/ time for diagnosis, treatment planning, and followup Inpatient Episodes Patient Unneeded Testing 80 Global Requires ROI Analysis & Targeting Return on Investment (ROI; Cost-Effectiveness) Cost of intervention vs. Savings from reduced utilization Timeframe for Return Short-term: readmission, ER reduction, complex patients Long-term: prevention, early-stage chronic disease patients Targeting Services/Patient Segmentation Focusing additional services on high-utilization patients vs. Providing services to all patients as a general benefit 81 27

28 Goal: Give Docs the Capacity to Deliver Accountable Care Data and analytics to measure and monitor utilization and quality Physician Practice + Partners = ACO Coordinated relationships with other specialists and hospitals Capability for tracking patient care and ensuring followup (e.g., registry) Method for targeting high-risk patients (e.g., predictive modeling) Resources for patient educ. & selfmgt support (e.g., RN care mgr) Physician w/ time for diagnosis, treatment planning, and followup Inpatient Episodes Patient Unneeded Testing 82 Can Small Physician Practices Manage Accountable s? Infrastructure/Services Small physician practices may not have enough patients to justify staff or other services to coordinate care, particularly for patients with complex illnesses (e.g., nurse care managers, patient registries, etc.) Quality/Cost Measurement Small numbers of patients make measurement unreliable; physicians may be inappropriately labeled low quality, high cost, or vice versa MD DO MD DO DO MD DO MD MD DO MD DO MD DO MD DO DO MD DO MD? Better Patient s & Lower Cost 83 Solution 1: Hospitals Acquire Physician Practices Hospital Management Data and analytics to measure and monitor utilization and quality Coordinated relationships with specialists and hospitals Capability for tracking gpatient care and ensuring followup (e.g., registry) Method for targeting high-risk patients (e.g., predictive modeling Resources for patient educ. & selfmgt support (e.g., RN care mgr) MD DO MD DO DO MD DO MD MD DO MD DO MD DO MD DO DO MD DO MD MD DO MD DO DO MD DO MD DO MD DO MD MD DO MD DO DO MD DO MD Better Patient s & Lower Cost 84 28

29 Shared Savings Forces Hospitals To Consider Hiring Physicians Hospitals are not directly eligible for shared savings; all savings are attributed to primary care physicians Even if the hospital reduces readmissions, infections, complications, etc., it may receive no reward for doing so Reducing hospitalizations, ER visits, etc. will reduce the hospital s revenues, but the hospital may receive no share of the savings to help it cover its stranded fixed costs Consequently, hospitals may feel compelled to own physician practices, either to capture a portion of the shared savings revenue, or to prevent there from being any savings! 85 Solution 2: Hospital-Physician Partnerships Data and analytics to measure and monitor utilization and quality Coordinated relationships with specialists and hospitals Capability for tracking patient care and ensuring followup (e.g., registry) Method for targeting high-risk patients (e.g., predictive modeling Resources for patient educ. & selfmgt support (e.g., RN care mgr) Hospital Staff & IT (e.g., via Physician- Hospital Org.) MD DO MD DO DO MD DO MD MD DO MD DO MD DO MD DO DO MD DO MD MD DO MD DO DO MD DO MD DO MD DO MD MD DO MD DO DO MD DO MD Better Patient s & Lower Cost 86 Solution 3: Use IPAs for Critical Mass Data and analytics to measure and monitor utilization and quality Coordinated relationships with specialists and hospitals Capability for tracking patient care and ensuring followup (e.g., registry) Method for targeting high-risk patients (e.g., predictive modeling MD DO MD DO DO MD DO MD MD DO MD DO MD DO MD DO DO MD DO MD Resources for patient educ. & selfmgt support (e.g., RN care mgr) Independent Practice Association MD MD DO MD DO DO MD DO MD DO MD DO MD DO MD DO DO MD DO MD Better Patient s & Lower Cost 87 29

30 Examples of Small, Independent MD Practices With Global Pmt Small Primary Care Practices Managing Global s Physician Health Partners (PHP) in Denver, CO is a management services organization that supports four separate IPAs (median size: 3 MDs/practice). PHP accepts capitated risk-based contracts on behalf of the IPAs with both Medicare and commercial HMOs. Independent PCPs & Specialists Managing Global s Northwest Physicians Network (NPN) in Tacoma, WA is an IPA with 109 PCPs and 345 specialists in 165 practices (average size: 2.4 MDs/practice). NPN accepts full or partial risk capitation contracts, operates its own Medicare Advantage plan, and does third party administration for self-insured businesses. Joint Contracting by MDs & Hospitals for Global s The Mount Auburn Cambridge IPA (MACIPA) and Mount Auburn Hospital jointly contract with three major Boston-area health plans for full-risk capitation. The IPA is independent of the hospital; they coordinate care with each other without any formal legal structure How Does All This Fit Into Accountable Care Organizations?? 89 If Physician Practices Want to Manage a Patient Population... PATIENTS Heart Disease Back Pain Pregnancy Primary Care Practice Cardiology Group Orthopedic Group OB/GYN Group 90 30

31 ...Should They Hope Payers Will Make the Right Changes? MEDICARE/HEALTH PLAN PATIENTS Heart Disease Back Pain Pregnancy Care Mgt Pmt +P4P Primary Care Practice Cardiology Group Orthopedic Group OB/GYN Group Heart Episode Pmt Back Episode Pmt Pregnancy Episode Pmt 91 Or Take a Single & Work Out Internal Pmts Themselves? MEDICARE/HEALTH PLAN PATIENTS Heart Disease Back Pain Pregnancy Care Mgt Pmt +P4P Primary Care Practice ACO Condition-Adjusted Comprehensive Care (Global) Cardiology Group Orthopedic Group OB/GYN Group Heart Episode Pmt Back Episode Pmt Pregnancy Episode Pmt 92 Reducing Costs Without Rationing: Reduces Hospital Revenues Healthy Consumer Continued Health Preventable Condition Fewer Patients Fewer Admissions Less Revenue Per Admission No Hospitalization Acute Care Episode Efficient High-Cost Complications, Infections, Readmissions 93 31

32 How Will Hospitals Have to Change? Answer: Smaller and higher-priced Huh???? Higher priced?? In most industries, we want volume to go up, and when it does, prices go down. Why? Fixed costs are spread more broadly. In the health care industry, we don t want it to sell more products/services in total. In hospitals, most costs are fixed costs Implication: lower volume means higher unit cost (just like every other industry), although total spending should still be lower 94 Hospital Costs Are Not Proportional to Utilization Cost & Revenue Changes With Fewer Patients 1,000 7% reduction 980 in cost % reduction in volume Costs #Patients 95 Reductions in Utilization Reduce Revenues More Than Costs Cost & Revenue Changes With Fewer Patients 1,000 7% reduction 980 in cost % reduction in volume % reduction 900 in revenue Revenues Costs #Patients 96 32

33 Causing Negative Margins for Hospitals Cost & Revenue Changes With Fewer Patients 1, Payers Will Be 900 Underpaying For 880 Care If 860 Adverse Events, 840 Readmissions, Etc. 820 Are Reduced Revenues Costs #Patients 97 So Prices Need to Be Re-Set Under Reform Cost & Revenue Changes With Fewer Patients Payers Can 1,000 Still Save 980 Without Causing 960 Negative Margins 940 for Hospital Revenues 860 Costs #Patients 98 Creating A Feasible Glide Path to the Future for Hospitals For a hospital that s constantly full and growing, a reduction in chronic disease admissions may be welcome, particularly since they may be less profitable than elective surgery cases But for small community hospitals with empty beds, and hospitals with narrow operating margins, reductions in chronic disease admissions and readmissions could cause serious financial problems, particularly in the short run In the long run, with sufficient reductions in admissions, a hospital could restructure to reduce its fixed costs (close units, etc.), but it will take time Consequently, payers and hospitals will need to renegotiate payment levels to enable hospitals to remain solvent 99 33

34 Benefit Design Changes Are Also Critical to Success Ability and Incentives to: Improve health Take prescribed medications Allow a provider to coordinate care Choose the highest-value providers and services Benefit Design Patient System Provider Ability and Incentives to: Keep patients well Avoid unneeded services Deliver services efficiently Coordinate services with other providers 100 Example: Important to Coordinate Pharmacy & Medical Benefits Single-minded focus on reducing costs here......could result in higher spending on hospitalizations Pharmacy Benefits (Part D) Medical Benefits (Parts A/B) Drug Costs Hospital Costs Physician Costs High copays for brand-names when no generic exists Doughnut holes & deductibles Other Services Principal treatment for most chronic diseases involves regular use of maintenance medication 101 Both & Benefits Are Controlled by the Payer PAYER Ability and Incentives to: Improve health Take prescribed medications Allow a provider to coordinate care Choose the highest-value providers and services Benefit Design Patient System Provider Ability and Incentives to: Keep patients well Avoid unneeded services Deliver services efficiently Coordinate services with other providers

35 But Purchaser Support is Needed Particularly for Benefit Changes Purchaser Purchaser Purchaser PAYER Ability and Incentives to: Improve health Take prescribed medications Allow a provider to coordinate care Choose the highest-value providers and services Benefit Design Patient System Provider Ability and Incentives to: Keep patients well Avoid unneeded services Deliver services efficiently Coordinate services with other providers 103 And Consumer Support is Critical for Purchaser/Plan Support Purchaser Purchaser Purchaser PAYER Benefit Design System Patient Provider 104 Ensuring That Lower Cost Lower Quality Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care

36 Effective Quality Measurement and Reporting Needed Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs 106 Federal Measurement of Quality? Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs Undesirable: National data aggregation and reporting E.g., PQRI 107 Community-Driven Quality Measurement Concern: Giving healthcare providers more accountability for costs reduces the incentives for overuse, but raises concerns about whether patients will get too little care Solution: Measure healthcare quality and include incentives for providers to maintain/improve quality as well as reduce costs Wisconsin Collaborative for Healthcare Quality Ideal: Develop quality Minnesota Community Measurement measures with participation Iowa Healthcare Collaborative of physicians and hospitals, as Regional Health Improvement Collaboratives do

37 Measurement vs. Analysis Measurement presumes we know what we re looking for, that we know what s desirable/achievable in all communities, and that we can legitimately rate/rank providers based on the measures That s a high standard, and it s not surprising that we don t have adequate measures in many important areas, particularly outcome measures Analysis, particularly exploratory analysis, presumes only that we believe there are opportunities to improve value, and that more work will be needed to determine what is achievable and cost-effective 109 (Many) Other Issues Malpractice/Defensive Medicine Reforms in malpractice law Collaborative changes in physician practice, so more conservative care is the standard of care across the entire community e.g., HealthTeamWorks/Colorado Clinical Guidelines Collaborative Workforce Training/Retraining More PCPs, more nurses willing to make home visits, fewer support staff for fewer procedures, etc. And Others 110 Reform Is Necessary, But Not Sufficient Patient Education & Engagement Quality/Cost t Analysis & Reporting Reducing Costs Without Rationing Value-Driven Systems & Benefit Designs Value-Driven Delivery Systems

38 Many Specific Activities in Each Area... Patient Education/ Engagement Education Materials Value-Based Choice Wellness & Adherence Quality/ Cost Analysis & Reporting Claims, Clinical & Patient Data Public Reporting Business Case Analysis Reducing Costs Without Rationing Engagement of Purchasers Alignment of Multiple Payers Value-Driven & Benefits Benefit Design System Design Value-Driven Delivery Technical Systems Assistance to Providers Design & Delivery of Care Provider Organization/ Coordination All of Which Need to Be Coordinated to Be Do patients know which providers offer the highest value care? Value-Based Choice Education Materials Wellness & Adherence Will benefit designs give patients the ability to adhere to care plans? Claims, Clinical & Patient Data Public Reporting Business Case Analysis Will investments in new care models create savings > costs? Design & Delivery of Care Technical Assistance to Providers Provider Organization/ Coordination Engagement of Purchasers Alignment of Multiple Payers Benefit Design System Design Will payment support better care? Can providers accept new payment models? With Active Involvement of All Healthcare Stakeholders Healthcare Providers Healthcare Payers Regional Health Improvement Collab. Healthcare Purchasers Healthcare Consumers

39 E.g., Comprehensive Approach to Readmission Reduction Analyze data on readmissions to identify which types of patients are being readmitted at high volumes/rates Analyze and redesign current healthcare delivery system Which physician practices are caring for the patients, both in the hospital and in the community? How can care processes in the hospital and in physician practices be redesigned to prevent ER visits & hospitalizations? What is the most cost-effective way to provide care management support for patients hospital? PCP? Home health? Establish business case for improvement What reductions in readmission rates are needed to justify higher expenditures on care management and other services? Change payment systems and benefit designs Provide coaching to providers Provide education and support for patients Analyze real-time data for continuous improvement 115 How Can All These Functions Be Delivered in a Coordinated Way? Education Materials Value-Based Choice Wellness & Adherence Claims, Clinical & Patient Data Public Reporting Business Case Analysis? Engagement of Purchasers Alignment of Multiple Payers Benefit Design System Design Technical Assistance to Providers Design & Delivery of Care Provider Organization/ Coordination 116 The Role of Regional Health Improvement Collaboratives Education Materials Value-Based Choice Wellness & Adherence Claims, Clinical & Patient Data Public Reporting Business Case Analysis Regional Health Improvement Collaborative Engagement of Purchasers Alignment of Multiple Payers Benefit Design System Design Technical Assistance to Providers Design & Delivery of Care Provider Organization/ Coordination

40 ...With Active Involvement of All Healthcare Stakeholders Healthcare Providers Healthcare Payers Regional Health Improvement Collab. Healthcare Purchasers Healthcare Consumers 118 Leading Regional Health Improvement Collaboratives Albuquerque Coalition for Healthcare Quality Aligning Forces for Quality South Central PA Alliance for Health Better Health Greater Cleveland California Cooperative Healthcare Reporting Initiative California Quality Collaborative Finger Lakes Health Systems Agency Greater Detroit Area Health Council Health Improvement Collaborative of Greater Cincinnati Healthy Memphis Common Table Institute for Clinical Systems Improvement Integrated Healthcare Association Iowa Healthcare Collaborative Kansas City Quality Improvement Consortium Louisiana Health Care Quality Forum Maine Health Management Coalition Massachusetts Health Quality Partners Midwest Health Initiative Minnesota Community Measurement Minnesota Healthcare Value Exchange Nevada Partnership for Value-Driven Healthcare (HealthInsight) New York Quality Alliance Oregon Health Care Quality Corporation P2 Collaborative of Western New York Pittsburgh Regional Health Initiative Puget Sound Health Alliance Quality Counts (Maine) Quality Quest for Health of Illinois Utah Partnership for Value-Driven Healthcare (HealthInsight) Wisconsin Collaborative for Healthcare Quality Wisconsin Healthcare Value Exchange 119 Moving to Accountable Care There is no one-size-fits-all solution to healthcare transformation; each region will need to actually make it happen in its own unique environment. The best federal policy will support regional innovation. reform is necessary, but not sufficient. Delivery system reform, changes in benefit design, and effective quality measurement are also essential. Everything needs to focus on improving outcomes. Physicians need to take the lead by agreeing to take accountability for reducing costs without rationing, creating organizational structures that enable them to do so, and demanding the payment changes needed to support them

41 For More Information on and Delivery Reforms For More Information: Harold D. Miller Executive Director, Center for Healthcare Quality and Reform and President & CEO, Network for Regional Healthcare Improvement (412)